MANAGEMENT

Detailed explanation-1: -What Is a Flotation Cost? Flotation costs are incurred by a publicly-traded company when it issues new securities and incurs expenses, such as underwriting fees, legal fees, and registration fees. Companies must consider the impact these fees will have on how much capital they can raise from a new issue.

Detailed explanation-2: -The cost of capital, though, is the total amount of money a business requires to get the money it needs for its operations. When a business needs money (or its cost of capital), it can turn to one or more sources to raise the money.

Detailed explanation-3: -The costs that a company incurs when it makes a new issue of either stocks or bonds. Floatation costs include the costs of printing the certificates, paying the underwriters, government fees, and other associated costs.

Detailed explanation-4: -Flotation is the process of converting a private company into a public company by issuing shares available for the public to purchase. It allows companies to obtain financing externally instead of using retained earnings to fund new projects or expansion.

Detailed explanation-5: -After the flotation costs are determined by a company, the expenses are incorporated into the final price of the issued securities. Essentially, the incorporation of the costs reduces the final price of the issued securities and subsequently lowers the amount of capital that a company can raise.